Energy & Environmental Law Blog : Energy & Environmental Lawyer & Attorney : Vorys, Sater, Seymour and Pease Law Firm : Oil, Gas & Green Technology

We reported earlier this month on a U.S. EPA study purporting to link groundwater contamination in Pavillion, WY to frac operations (see here).  The Star-Tribune has an interesting article noting some of the defects in that study:  "Yet the EPA’s own data —including details not mentioned in the draft report — indicates the agency’s conclusions are partially based on improperly analyzed samples from six private drinking-water wells and two EPA-drilled deep monitoring wells in Pavillion. *** The EPA also found contamination in pure water control samples, didn’t purge the test wells properly before gathering samples and didn’t mention in its report whether it tested water carried by a truck used in well drilling, say officials with the Wyoming Water Development Commission who, because of their expertise on water wells, reviewed the EPA’s publicly available information."

As we noted before, U.S. EPA's record on these types of issues isn't that good ...

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Natural gas prices have reached a 2-year low, according to this article in the WSJ:  "Natural gas for February delivery lost 9.4 cents, or 3%, to settle at $3.027 cents per million British thermal units on the New York Mercantile Exchange, the contract's lowest settlement since September 2009. *** Futures hit an intraday low of $3.001/MMBtu, bringing the front-month price within striking distance of $3, a level that also was last reached in September 2009."

(Note:  Subscription may be required.)

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The Times Leader has an interesting article on a new study done by researchers at Wilkes University on the greenhouse gas footprint of natural gas:  "'The main message is that seven independent studies now agree that shale gas has a lower greenhouse footprint than coal. That conclusion largely contradicts the findings by a team of researchers at Cornell who published a paper last April that argued shale gas has a higher footprint than coal due to inadvertent releases of methane at gas wells,' [Professor] Klemow said."

Seven?  Nice.

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The West Virginia Department of Environmental Protection is gearing up to meet new Marcellus demands on the agency, according to this article in the Charleston Gazette:  "But the boom in the natural gas industry, Huffman said, it's hard for DEP to compete with private sector jobs that can be two or three times as much. Currently, state oil and gas inspectors make and average of $32,000 a year and their supervisors an average of $38,000, Huffman said. The legislation sets a minimum inspector's salary of $35,000 a year and a floor for oil and gas supervising staff of $40,000 annually."

Interesting.  We'll be seeing the same here in Ohio soon.

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The Houston Chronicle is reporting on the potential for power generation to help slumping natural gas demand:  "Technology that allows drillers to access densely buried fossil fuels has launched a drilling frenzy in shale rock regions, pushing the supply of natural gas to a record high and its prices to cavernous lows. But heat-efficient buildings and a mild autumn up North have curbed consumers' desire for the fuel. *** Increasingly, industry watchers say, the most promising cure for the glut isn't natural gas-powered vehicles or manufacturing. It's in the declining popularity of coal, the country's dominant power plant fuel."

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The Dallas Post has an interesting article describing the timeline for citing a Chief Gathering LLC natural gas compressor station.  For example:  "Jan. 21, 2011 - Chief Gathering LLC submits an application for special zoning exceptions to build a 5-acre natural gas compressor station on property owned by Robert Hayes at 49 Hildebrandt Rd. The site, estimated to be 1,150 feet away from the school district property line, would include a metering facility, several tanks, a glycol dehydrator, a building to house compressor engines and a 100-foot radio tower.  *** Jan. 25, 2011 - Protesters take to the Dallas School District campus to distribute flyers in opposition of the proposed compressor station."

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The WSJ has a report on how the interests of large domestic manufacturers and natural gas exporters may diverge:  "U.S. officials will soon weigh in on a fight between companies that want to export some of America's fast-growing supply of natural gas and big manufacturers that oppose the exports because they rely on cheap domestic gas.  *** The Energy Department is looking at whether exports will drain U.S. supplies and inflate domestic prices. The Energy Information Administration, part of the department, is expected to deliver its analysis in a few weeks."

(Note:  Subscription may be required.)

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The Columbus Dispatch is reporting on a new Spectra Energy Corp. pipeline intended to connect Ohio resources to Spectra’s Texas Eastern pipeline system, which runs from Texas to New York.  "The Texas Eastern pipeline already goes through Ohio from east to west. This new addition will create a connection between the pipeline and the northeastern Ohio counties that are expected to have the most shale-gas resources, though the specific path is still being determined, said Wendy Olson, spokeswoman for Houston-based Spectra."

For more, see here (Spectra press release).

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The Ohio Environmental Protection Agency (Ohio EPA) has issued its final National Pollutant Discharge Elimination System Industrial Storm Water General Renewal Permit. This permit is significantly different than Ohio EPA’s previous industrial storm water general permit, which included broad, non-facility specific, permit requirements. This final renewal permit now mirrors U.S. EPA’s Multi-Sector Industrial Storm Water General Permit and establishes industry-specific requirements for managing and monitoring storm water discharges.

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The WSJ has an interesting article on the opportunities for natural gas liquids production from the country's shale resources:  "The boom has turned into a potential profit center for oil-and-gas producers, as well as for the pipeline companies that transport the fuel. Demand for ethane grew to about 933,000 barrels a day during the first half of 2011, up from 812,000 barrels a day in 2009, according to Bentek Energy. But like the other fuels extracted from remote shale deposits, the biggest problem is how to get it to facilities that can process it."  (Note:  Subscription may be required.)

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The Intelligencer has an interesting article on the natural gas processing plant being built by Dominion Transmission in Marshall County, West Virginia:  "Dominion Transmission's natural gas processing facility is the largest piece yet of what local officials hope will be an industrial rebirth for the Ohio Valley. The crown jewel of that rebirth would be an ethane cracker facility along the Ohio River, a multi-billion dollar project that remains in the works as 2012 looms."

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The WSJ is reporting that Governor Earl Ray Tomblin is prepared to sign a new rule package governing Marcellus drilling in West Virginia:  "Large-scale drilling for natural gas in West Virginia's Marcellus shale deposit will require $10,000 and $5,000 permit fees, buffer zones around wells and advance notices to property owners and the public, under a broad regulatory package the Legislature approved Wednesday.  *** Gov. Earl Ray Tomblin heralded the measure at a packed Capitol news conference shortly after the House of Delegates passed it 92-5 and the Senate then voted unanimously to send it to his desk, ending a four-day special session."

For a copy of the legislation, see here.

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The Sacramento Bee is reporting on a new study published by PwC addressing the potential benefits for manufacturers from U.S. shale gas development:  "'An underappreciated part of the shale gas story is the substantial cost benefits that could become available to manufacturers based upon estimates of future natural gas prices as more shale gas is recovered,' said Bob McCutcheon, U.S. industrial products leader, PwC. He continued, 'In fact, the number of U.S. chemicals, metals and industrial manufacturing companies that disclosed shale gas potential and its impact so far in 2011 easily surpassed that of the last three years combined, indicating this is of growing importance in the outlook of U.S. manufacturers. The significant uptick in shale gas commentary among the manufacturing community reflects the positive influence that shale gas is having from investment, operational and demand standpoints.'"

For a copy of the study, see here.

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One of our partners has been named an Environmental MVP by Law360:  "As lead attorney for Hamilton County, Ohio, in a federal crackdown on sewage overflows, Mark Norman of Vorys Sater Seymour & Pease LLP negotiated a consent decree that allowed the county to commit an additional $1.79 billion in infrastructure improvements while protecting the county's finances and ratepayers, earning him a spot among Law360's Environmental MVPs."  (Note:  Subscription may be required.)

Nice job!

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The WSJ is reporting that both Texas and Colorado have now adopted rules requiring disclosure of frac fluid constituents:  "The rules are part of a broader effort by states to show they are serious about regulating the rapidly expanding hydraulic fracturing ahead of possible new federal rules governing chemical disclosure, water disposal, air emissions and well construction."  (Note:  Subscription may be required.)  For more on the Texas program, see here (the Houston Chronicle) and here (for a copy of the rules).  For more on the Colorado program, see here (the Colorado Independent) and here (for a copy of the rules).

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Ohio EPA has issued a Draft General Permit for Water Quality Certification related to oil and gas exploration and production (E&P) wells and attendant features.  The stated purpose of the General Permit is to expedite the review of applications for the construction of E&P wells and attendant features pursuant to Clean Water Act Section 401.  Only minimal adverse impacts to waters of the State will be covered by this general permit.  Unfortunately, this general permit will not speed decisions for CWA Section 404 permits required from the Army Corps of Engineers.  Comments are due to Ohio EPA by January 13, 2012.  To see the Public Notice, Draft General Permit and other information related to this, see here.

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The NYT is reporting on a recent study by U.S. EPA regarding complaints of water contamination in Pavillion, Wyoming:  "Chemicals used to hydraulically fracture rocks in drilling for natural gas in a remote valley in central Wyoming are the likely cause of contaminated local water supplies, federal regulators said Thursday."  For more, including a copy of the EPA report, see here.

A note of caution, however:  U.S. EPA's record on these issues isn't good so far.  See also here.

[Update:  For Encana's response to the report, see here (E.g., "Several of the man-made chemicals detected in the EPA deep wells have never been detected in any of the other wells sampled. They were, however, detected in many of the quality control (blank) samples - which are ultra purified water samples commonly used in testing to ensure no contamination from field sampling procedures."  Hmmm ...).  (Bumped.)]

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The Charleston Daily Mail is reporting that unions are prepared to wage a multi-front battle against those in the oil patch to make sure its members are the ones getting the jobs:  "Union leaders are prepared to wage a multi-front battle against major natural gas-related projects that do not employ local workers. *** The West Virginia Affiliated Construction Trades Foundation is already airing TV ads targeting a $500 million gas processing plant Dominion is building in the Northern Panhandle. *** But unions are unlikely to stop at advertising campaigns. ACT might start to challenge environmental and export permits, among other things, a top union official said this week."

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The WSJ has an interesting report on a new study issued by ExxonMobil:  "Natural gas will replace coal as the leading fuel for generating electricity in the U.S. by 2025, when it will also become the world's No. 2 overall fuel source thanks to its abundance and a drive for cleaner-burning energy, according to the latest long-term outlook from Exxon Mobil Corp."  (Note:  Subscription may be required.)

From the related ExxonMobil press release:  "Demand for energy will rise through 2040 as global economic output doubles and prosperity expands across a world where population will grow to nearly 9 billion people, Exxon Mobil Corporation states in its The Outlook for Energy: A View to 2040, issued today. Extending its annual long-term energy forecast to 2040 for the first time, ExxonMobil said this year's Outlook reveals several trends that will influence how the world uses energy over the coming decades."  For a copy of the outlook, see here.

Very interesting.

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We've reported previously on air emissions studies done in Pennsylvania (see here, e.g.).  The Pennsylvania Department of Environmental Protection (PA DEP) is now requiring certain E&P companies to submit air emissions data regarding their facilities for 2011 by March 1, 2012:  "'The use of natural gas for fuel will have very beneficial impacts on air quality, and we want to ensure we are protecting the quality of Pennsylvania’s air as we access and bring to market this abundant, domestic fuel source,' DEP Secretary Mike Krancer said. *** This week, the agency is initially asking 99 operators identified as being involved in natural gas development, production, transmission, processing and related activities to respond with the necessary data."  (From this press release.)

For more, see here.

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The Colorado Independent is reporting on new frac fluid disclosure rules being considered by the Colorado Oil and Gas Conservation Commission (COGCC):  The commission "will take at least another week to decide on the issue after hearing more than 11 hours of testimony from Colorado residents, elected officials, oil and gas industry representatives and drilling regulators in Denver."  Notably, one COGCC director defended various staff positions preserving trade secret protections according to the article.

Interesting.

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The Houston Chronicle is reporting:  "A nationwide boom in natural gas production is set to fuel nearly 900,000 jobs and add roughly $1,000 to annual household budgets by 2015, according to a new industry study released Tuesday."  From the President and CEO of ANGA (America's Natural Gas Alliance), which commissioned the study:  "At a time when our nation's economy is still suffering from a downturn and jobs are top-of-mind for many Americans, the impact of shale gas on employment is invaluable. Last year, shale plays supported 600,000 jobs, and by 2035, the study projects that shale gas will support more than 1.6 million jobs."

For a copy of the study (including video statements by local business owners), see here.

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MedPage Today has an interesting article on the claimed health impacts of increased Marcellus exploration in Pennsylvania.  The take-away conclusions:  "A few people have had clearly documented health problems related to the Marcellus gas boom, but these were occupational exposures in rig workers.  Some aspects of gas drilling and production release toxins into the environment, but the level of exposure to the public is uncertain and no links to specific instances of disease have been confirmed, and may never be."  (Emphasis is ours.)  And regarding groundwater contamination due to frac operations in particular:  "But in that scenario the fracking chemicals would presumably be highly diluted. Rob Jackson, PhD, of Duke University, said preliminary results from a study he and his colleagues conducted in northeastern Pennsylvania showed no evidence of fracking fluids or brine in well water sampled from more than 200 sites."  (Emphasis is also ours.)

Read the whole thing.

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The Intelligencer has another interesting article looking at the fee legislation proposed in West Virginia.  "Now, the fee is $650, but would increase to $10,000 for the first well and $5,000 for each additional well on the drilling pad, if the legislation is ultimately signed into law by Gov. Earl Ray Tomblin."  The bargaining chip?  Well, at least for one legislator - it looks like hiring more WV organized labor:  "State Sen. Orphy Klempa is prepared to push for a higher natural gas severance tax if drilling companies do not prove to him that they plan to hire more West Virginia workers.  *** Klempa, D-Ohio, is affiliated with organized labor as co-chairman of Project BEST. He is a member of the Legislature's Joint Select Committee on Marcellus Shale, which passed a bill for the full Legislature's consideration that, among many changes, would increase the permit fee to drill a Marcellus well in West Virginia substantially."

Come to Ohio!

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We've reported previously on the NYT's efforts to find environmental and economic issues in the oil patch (see here, e.g.).  Now it seems that they want to complain about oil and gas leases:  "Americans have signed millions of leases allowing companies to drill for oil and natural gas on their land in recent years. But some of these landowners — often in rural areas, and eager for quick payouts — are finding out too late what is, and what is not, in the fine print."

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We reported previously on a study done by Penn State researchers reporting that "[t]ests of water wells near gas drilling sites generally didn't find detrimental changes in water quality."  See here.  The WSJ is reporting that the researchers found an error in the report resulting in "far less evidence of well contamination by bromides, salty mineral compounds that can combine with other elements to cause health problems, than first suggested."  (Emphasis is ours.)  (The error stemmed from an independent lab analysis.)

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Columbus Business First has an interesting article on a Federal Reserve report on the Midwest that finds (among other things):  "Expanding activity in the pursuit of oil and natural gas in Ohio’s underground shale fields. Production in wells that already have been drilled in the state has been 'good,' according to the report."

Read the whole thing (it's short, but with links to core documents).

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For pipeline affiliates bidding on capacity (from the summary):  "In this Final Rule, the Federal Energy Regulatory Commission revises its regulations governing interstate natural gas pipelines to prohibit multiple affiliates of the same entity from bidding in an open season for pipeline capacity in which the pipeline may allocate capacity on a pro rata basis, unless each affiliate has an independent business reason for submitting a bid. The Commission does not find it necessary to adopt its proposal in the Notice of Proposed Rulemaking that if more than one affiliate of the same entity participates in such an open season, then none of those affiliates may release any capacity obtained in that open season pursuant to a pro rata allocation to any affiliate, or otherwise allow any affiliate to obtain the use of the allowed capacity."  For a copy of the rule, see here.

Effective date:  December 23, 2011.

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